Bear Stearns

Fed chairman Ben Bernanke is covered in a long profile by Roger Lowenstein in the Atlantic. The sympathetic account takes the reader blow-by-blow through the criticism that he has received from virtually all quarters during his tenure as Fed chair. What Lowenstein hones in on are the reviews and criticisms of Bernanke’s performance in “resurrecting the economy” — the interest rate policy, his interpretation of the dual mandate, quantitative easing, Operation Twist, etc. But for a piece that clocks in at 8,287 words, Lowenstein pays scant attention to the emergency actions taken to save the financial system itself.

Americans have an illogical love affair with their vehicles. There are 209 million licensed drivers in the U.S. and 260 million vehicles. The U.S. has a higher number of motor vehicles per capita than every country in the world at 845 per 1,000 people. Germany has 540; Japan has 593; Britain has 525; and China has 37. The population of the United States has risen from 203 million in 1970 to 311 million today, an increase of 108 million in 42 years. Over this same time frame, the number of motor vehicles on our crumbling highways has grown by 150 million. This might explain why a country that has 4.5% of the world’s population consumes 22% of the world’s daily oil supply. This might also further explain the Iraq War, the Afghanistan occupation, the Libyan “intervention”, and the coming war with Iran. Automobiles have been a vital component in the financial Ponzi scheme that has passed for our economic system over the last thirty years. For most of the past thirty years annual vehicle sales have ranged between 15 million and 20 million, with only occasional drops below that level during recessions. They actually surged during the 2001-2002 recession as Americans dutifully obeyed their moron President and bought millions of monster SUVs, Hummers, and Silverado pickups with 0% financing from GM to defeat terrorism. Alan Greenspan provided the fuel, with ridiculously low interest rates. The Madison Avenue media maggots provided the transmission fluid by convincing millions of willfully ignorant Americans to buy or lease vehicles they couldn’t afford. And the financially clueless dupes pushed the pedal to the metal, until everyone went off the cliff in 2008.

This cannot be the right course for us to take in the wake of such a widely recognized crisis. The lack of purposeful outrage is deafening. We cannot restore lasting stability to our economy and society unless we are willing to face up to what we did wrong, right it, and throw out the bums who put us there. Without that, the pattern of ever escalating crisis and interventionist, market-distorting solutions will surely lead to a bigger crisis still ahead... Perhaps the most important symbol of our failure to address reform are the pictures accompanying much of the coverage of Greg Smith’s letter, those of a power-posing Blankfein and Cohn, who without the Government’s accommodation might be striking a very different pose, indeed. You want to sign on to Mr. Smith’s army in joint distaste for Goldman’s lost culture? Please, be my guest. But more deserving of your enmity is the insidious co-option of the core premise of capitalism by a handful of people to ensure the banks’ undeserved survival, and their managers’ really nice lifestyle.

Today, the metals space is abuzz with a CFTC "comment letter" posted on its website by an alleged "current JPM employee." There is only one problem - this letter is either a complete fraud or simply a total mockery, as it provides absolutely nothing new, and merely regurgitates existing manipulation claims already out in the public domain, and backed by precisely zero evidence. How about attaching a signed trade confirm, or a daily internal P&L report, or even a blotter entry? No? Because they don't exist? Needless to say, anyone can submit such an alleged insider letter, and since there is no name associated to it, we would advise everyone to merely enjoy this a prank attempt. Unfortunately, what more such repeated faux "whistleblower letters", which are likely forthcoming, from other "current JPM employees" will do is simply dilute the effect of any real such disclosure that may come in the future. For that purpose, we strongly caution anyone who considers submitting such disinformation attempts from doing so as it will merely impair and discourage any just intent of validated and justified whistleblowing, either at JPM or elsewhere.

Dear Mr. Dimon,

Why do you impugn your character and reputation by allowing your firm to engage in these immoral activities? Sure, the regulators have failed to assess you any meaningful punishments that would deter you from this conduct on a strict, short-term dollars and cents analysis. Every penny of earnings counts, I get it. But, sir, you do not strike me as someone who is trying to pump your company’s stock price for a quarter or two. You are the face of JPMorgan Chase and, I would assume, you plan on being there for a while. Why intentionally destroy any and all goodwill your firm has to make additional revenue that is mostly insignificant in the short-term and, quite possibly, deleterious in the long-term? The only reason I can think of is: because you can. And, that, sir is where hubris starts.

Not many websites, analysts or authors have both the balls/temerity & the analytical honesty to take Goldman on. Well, I say.... Let's dance! This isn't a collection of soundbites from the MSM. This is truly meaty, hard hitting analysis for the big boys and girls. If you're easily offended or need the 6 second preview I suggest you move on.

The cash settlement world of OTC derivatives is not investing, but gaming.  And the House sets the rules. 

And now for a word from Fireman Tim...

Re: LTRO2, banks, CRE and the oppurtunity to see just how much free really costs...

Nearly two years after his catastrophic foray into Op-Ed writing, here is Tim Geithner's latest, this time making the hypocritical case to "not forget the lesson from the financial crisis"... which he himself ushered on America as head of the New York Fed. Frankly we are quite sure it is not even worth reading this drivel: the unemployed man walking has been a total disaster during his entire tenure (at both the New York Fed where he supervised all the banks that subsequently fell, and the Treasury), and we are fairly confident that reading anything written by this pathological failure will cost collective IQs to drop by 10 points at a minimum. Hey Tim: is there a risk the US can get downgraded? Any risk?

So, yesterday it was revealed that both Goldman and JPM had about 145 billion of “gross” notional outstanding on CDS related to the PIIGS. That means they each had roughly 145 billion of purchases and sales. They spoke about various netting agreements that makes the real number lower. They also mentioned with collateral and on a mark to market basis, the real exposure is far lower. Fine, though I wonder why they don’t execute the “master” netting and get the gross notionals down? Wouldn’t that help the system? If these were cleared or on an exchange, all they would have a single net exposure for each country. The collateral and netting would be handled at the central clearing or exchange. Wouldn’t that be simpler? Safer? The e-mini S&P future contract seems to be able to trade that way just fine, and it is more volatile than CDS on most days. Italian CDS is in 25 bps today – seems like a lot, but the up-front payment to buy or sell Italian CDS has changed by less than 1%.

Here's concrete proof of a mass European bank run. If you missed it, don't worry - there'll be plenty more from where these came from...

Yep! If you push that sausauge too far in an attempt to hide it, it's bound to start hurting someone... somewhere... 

The “Placebo Effect” is fascinating. In a typical drug testing trial, one group of patients will receive the actual drug being tested, and a “control” group will be given an “inert” medicine (or “sugar pill”) that shouldn’t do anything for the patient, but the patient doesn’t know that. So much of what I find wrong about “economics” is that it masquerades as far more of a science than it actually is. It doesn’t have theories that can be “tested” in a real world, where 2 similar situations are treated differently to see which “treatment” works better. Each economy and each situation is so different that it is IMPOSSIBLE to determine why policies failed or what should have been done differently. It is possible to come up with reasonable ideas and theories of what could have been done or should have been done, but they are only theories. The systems are so complex that finding situations with similar starting conditions with similarly motivated entities involved is simply impossible to find. The fact that so much of our policy seems to be based on research into what should have been done in the Great Depression and what has been seen in Japan is frankly scary. There is no way to “know” how the Great Depression would have turned out with a different set of policies. We can make conjectures, but that is all they are – conjectures. The LTRO was designed to support the market, the market is up, so the LTRO must be working. That at least is the logic many investors are applying. They see the improvement in sovereign debt yields, the avalanche of “positive” (if unfounded) headlines, and the relentless march higher of the stock market. So the plan is working? Not so fast.

And I thought securitization ment they where going to keep the loan docs in a safe place in some bank vault some where...